Two quaking German delegates walked the length of the Hall of Mirrors at the Palace of Versailles to sign one of the most famous, even notorious, treaties in history. “The silence is terrifying,” wrote British diplomat Harold Nicolson in his diary. “They keep their eyes fixed away from those 2,000 staring eyes… They are deathly pale.” The Paris Peace Conference had opened on 18 January 1919 in Louis XIV’s grandiose palace. The negotiations were conducted in many places across the French capital and the result was no fewer than five treaties – named after various Parisian suburbs – each with one of the defeated Central Powers. But the most consequential of these was the Treaty of Versailles with Germany, signed in the Hall of Mirrors on 28 June 1919.

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For France, vengeance was sweet. “Une belle journée,” Georges Clemenceau, the French premier, declared tearfully. He told the assemblage: “We are here to sign a treaty of peace.” Both the timing and venue had been carefully calculated by the French. The start date, 18 January, was the anniversary of the day in 1871 when Wilhelm I had been proclaimed as emperor of the new German Reich in the Hall of Mirrors. This had been a deliberate act of political theatre by his chancellor, Count Otto von Bismarck, to rub French noses in the degradation of their defeat in the Franco-Prussian War. And so, after victory in the Great War, the French relished their chance to repay that humiliation with interest, formally administering the Reich’s last rites in the place where it had been born.

But almost as soon as the ink was dry, participants and commentators debated Clemenceau’s verdict. Was Versailles a treaty of peace? Or did it set the stage for another great war? Were the victor powers at Paris ‘peacemakers’ – or actually ‘warmakers’?

The most celebrated indictment was delivered by the young economist John Maynard Keynes, a disillusioned member of the British delegation in Paris. His bestselling polemic, The Economic Consequences of the Peace, published in December 1919, denounced the treaty as a “Carthaginian peace” (the term deriving from the total subjugation imposed on Carthage by Rome), with a “policy of reducing Germany to servitude for a generation” and thereby causing “the decay of the whole civilised life of Europe”.

In 1961, in an equally celebrated book, The Origins of the Second World War, the British historian AJP Taylor asserted that “the peace of Versailles lacked moral validity from the start” and claimed that “the first war explains the second and, in fact, caused it, in so far as one event causes another”. Similarly, in 1984 the US diplomat and historian George Kennan flatly stated that the Second World War resulted from “the very silly and humiliating punitive peace imposed on Germany”.

In trying to unpack the argument that the peacemakers – deliberately or not – sowed the seeds of future conflict, we need first to remember that the fate of Germany was not the only issue on their agenda. The whole map of Europe had been ripped apart by war and revolution, bringing down four great dynastic empires – the Romanovs, Habsburgs, Hohenzollerns and Ottomans – that had ruled the centre and east of the continent for centuries. Out of the debris, nationalist politicians and their armies were already creating new states, such as Czechoslovakia, and resurrecting old states like Poland. So, the Paris conference was an attempt to clean up the mess: the peacemakers did not start with a blank slate.

Nor were the three major Allied powers of one mind. Clemenceau and the French were focused obsessively on controlling Germany, whose population was 50 per cent larger than that of France and whose economy in 1913 had been the most advanced in Europe. The British prime minister, David Lloyd George, though anxious to gain reparations from Germany, saw the German economy as vital to the recovery of Europe. He feared that too punitive a peace would feed a desire for revenge and encourage the spread of Bolshevism across the continent. US president Woodrow Wilson was more detached from European specifics: his consuming ambition was to create a League of Nations to guarantee peace and security.

The resulting peace treaty was therefore a messy compromise between the Big Three. The French recovered Alsace and Lorraine, ceded in 1871 after defeat to Prussia, but were not allowed to annex the Rhineland in perpetuity. Instead Britain and America offered a joint guarantee of French security if Germany attacked again. Wilson got his League of Nations, but on terms that seemed to open up the prospect of unlimited obligations to keep the peace without having adequate power to do so.

Poland was reinvented as a state after more than a century of partition between Germany, Russia and Austria – but its revival was bitterly resented in Berlin, not least for the ‘Polish corridor’ that gave the new state access to the Baltic Sea at the expense of separating West and East Prussia. The British warned of German revanchism, but in the face of strong Franco-American support for Polish demands, they could only mitigate the situation by making Danzig (now Gdańsk in Poland), which was then largely German in population, into a ‘free city’ rather than part of Poland.

The whole map of Europe had been ripped apart by war and revolution. The Paris conference was an attempt to clean up the mess: the peacemakers did not start with a blank slate

Compromise was not only the result of disputes among the leading victor powers. It also reflected the fact that the Allies were not as strongly placed as they seemed. In fact, whatever the French hoped, 1919 was not adequate revenge for 1871. A genuine turning of the tables would have required a treaty to be forced upon Germany at its own historic heart, at Sanssouci or another of Frederick the Great’s palaces in Potsdam on the outskirts of Berlin. Yet this was impossible in 1919 because Germany had not been invaded, conquered and occupied. The armistice was therefore incomprehensible to millions of Germans. They became easy prey to those on the right such as Adolf Hitler who blamed it on a treacherous ‘stab in the back’ by pacifists, Bolsheviks and especially Jews. For these German rightists, 1918 was not defeat but actually a thwarted victory that had to be redeemed: that’s why Marshal Ferdinand Foch predicted darkly that Versailles was not a peace but merely an armistice for 20 years.

So, the fact that in 1919 the Allies imposed a Treaty of Versailles on Germany, not a Treaty of Potsdam, highlights the incompleteness of their victory. This became all too apparent when the US, whose economic strength and manpower had been crucial in sapping the German will to fight in 1918, pulled back from its wartime engagement in Europe. Unwilling to compromise, Wilson failed to get the necessary two-thirds majority in the Senate to secure ratification of the Treaty of Versailles. Since he had tied the League and the Anglo-American guarantee of French security to the treaty, the Americans reneged on those as well. The British had no intention of underwriting France by themselves, so the guarantee lapsed, leaving the French more exposed and therefore more intransigent.

Which brings us back to Keynes and the Carthaginian peace. Was it reparations that really embittered Germans, and broke their economy? No precise bill was fixed at Paris: the Treaty of Versailles simply established the principle that Germany and its allies were responsible for the damage caused by their war of aggression (article 231), while also acknowledging in article 232 that their resources were not adequate to make “complete reparation”. Similar pairs of balancing statements were inserted in all the treaties with the defeated powers but only the Germans (for propaganda reasons) presented the reparations issue as an Allied imputation of ‘war guilt’ – a phrase never used in the treaty.

In 1921, an Allied commission meeting drew up a schedule of reparations payments for Germany of 132 billion gold marks, or about $33 billion, plus interest. This draconian headline sum was, however, largely window dressing to satisfy French and British hardliners. In practice, the amount the Allies intended to exact was about 50 billion marks over 36 years, which still seemed a huge sum.

Viewed historically, though, the reparations bill was the latest round in a Franco-German game of tit for tat. When French policymakers considered reparations in 1919, they had in mind the provisions of the Treaty of Frankfurt in 1871, which Bismarck imposed on France after its devastating defeat. He, in turn, had looked back to Napoleon’s treatment of Prussia in the Treaty of Tilsit in 1807. The 1921 London Schedule of Payments imposed at most an annual burden of around 8 per cent of German national income – less than the 9–16 per cent that France paid annually in reparations after 1871. So the bill, most economic historians agree, was not financially intolerable.

Extracting reparations from Germany represented a desperate attempt to secure an economic substitute for the decisive victory the Allies had failed to win on the battlefield

The real issue was political. The Germans had not accepted defeat and had no intention of paying. For the French, conversely, extracting reparations represented a desperate attempt to secure an economic substitute for the decisive victory that the Allies had failed to win on the battlefield in 1918. In short, as one German official put it, the struggle over reparations was “the continuation of the war by other means”.

Successive Weimar governments went to great lengths to avoid paying their regular instalments of reparations. In the early 1920s, the economics ministry bought substantial amounts of foreign currency to help push down the value of the German mark and make German exports more competitive. An export boom, according to one key economic adviser, would “ruin trade with England and America, so that the creditors themselves will come to us to require modification” of the 1921 schedule.

“The goal of our entire policy must be the dismantling of the London ultimatum,” argued the German chancellor, Joseph Wirth, in 1922. He warned against attempts to balance the budget, for example by imposing a property tax, because this would show that the country’s fiscal problems were not insuperable and that money could be found for reparations – if Germans wanted to find it.

Covering this budget deficit meant printing money, which fuelled inflation, but tycoon Hugo Stinnes spoke for much of the German elite when he insisted in 1922 that “the choice had been between inflation and revolution”. It was, he said, “a question of your money or your life”. Yet inflation caused revolution of a different sort. From the autumn of 1922, price rises spiralled into hyperinflation on a scale dwarfing anywhere else in Europe.

Germany defaulted on its reparations payments, so in January 1923 the French and Belgians, following the principle of war by other means, sent in troops to occupy the Ruhr, Germany’s industrial heartland, and extract reparations in kind by force. Spontaneous local protests escalated into a campaign of passive resistance subsidised by the German government, which spread across the whole country.

By the time a new coalition led by Gustav Stresemann called off passive resistance, the currency had been destroyed and the Ruhr was on the brink of famine. In January 1914, it took 4.2 marks to buy one US dollar; a decade later, the nominal exchange rate was 4.2 trillion marks (an addition of 12 zeros). During 1923, daily employees collected their wages in baskets or wheelbarrows, often using them immediately to pay bills and buy goods because the banknotes lost value literally hour by hour. What pulled the country back from the brink was financial intervention by bankers in London and New York. In 1924, they provided funds to support a new German currency (the now worthless wartime Papiermark being replaced by the Reichsmark) and helped restructure reparations payments at a lower level, backed by an international loan. This package was known as the Dawes Plan, testimony not only to the energetic chairmanship of Charles Dawes, a Chicago banker, but also to the leading role played by US finance. Under this settlement, the Germans got the French out of the Ruhr, while France started to get reparations again from Germany.

During the 1920s, US investors became enmeshed in the German economy: the Dawes loan, floated in October 1924 by a nationwide syndicate of 400 banks and 800 bond houses, triggered a flood of US investment, followed by British and other lenders. Between 1924 and 1930, Germany borrowed nearly three times what it paid in reparations. The rest of the money was invested in German business (Ford and General Motors both bought up several automobile plants), in shares and municipal bonds – issued to pay for apartments, schools and other amenities. In short, foreign loans were being used in the same way as currency depreciation in the early 1920s – to sidestep the reparations burden and subsidise growth.

But just as currency depreciation eventually led to hyperinflation, so debt dependence became catastrophic when US loans tailed off after the Wall Street crash of 1929, destabilising the banking system just as Germany’s economy was sliding into recession. By 1932, industrial production was only 60 per cent of the 1929 figure and a third of the workforce was unemployed. Millions more were on reduced wages and much of the banking system had fallen apart. As a result of Germany’s depression, the most acute in Europe in the early 1930s, daily existence became a nightmare for the second time in less than a decade.

It’s no surprise that many Germans were ready to turn to a nationalist messiah. In the election of September 1930, the Nazi party won 18 per cent of the vote, becoming overnight the second largest party in the Reichstag. “I’ll see to it that prices remain stable,” Hitler asserted bombastically. “That’s what my stormtroopers are for.” There is “no doubt”, observes historian Jürgen von Kruedener, “that the rise of Hitler would have been unthinkable without the catastrophic effects of the Depression”.

When Adolf Hitler gained power, enthusiasm for his campaign to tear up the ‘Diktat’ of Versailles blinded millions of Germans to the true nature of his regime

The peacemakers made many mistakes, but they did not cause the next war. The Treaty of Versailles was a compromise document and, as a result, fell between two stools, alienating Germany without coercing it. It was also dependent on American involvement in Europe, which receded after 1919 – so that the US failed to ratify the treaty, join the league or honour the Anglo-American guarantee of French security that mattered so much in Paris.

The root problem was that Germany had not been comprehensively defeated on the battlefield. With its troops still holding a front in France and Belgium when the armistice was signed, its people were susceptible to arguments from the right that they had been robbed of victory by traitors at home. Reparations were so deeply resented, in practice and in principle, that successive Weimar governments risked economic stability in order to avoid having to pay. And when Hitler gained power, enthusiasm for his campaign to tear up the ‘Diktat’ of Versailles blinded millions of Germans to the true nature of his regime.

Little wonder that, when the Allies fought the next world war, they insisted on Germany’s “unconditional surrender,” occupied the whole of the country and held their victory conference at Pots-dam. There would not be another Treaty of Versailles.

Professor David Reynoldsis professor of international history at the University of Cambridge. His most recent book, co-authored with Vladimir Pechatnov, is The Kremlin Letters: Stalin’s Wartime Correspondence with Churchill and Roosevelt (YUP, 2018).

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